BofA Sets $5 Billion Buyback to Offset Buffett-Deal Dilution

(Bloomberg) -- Bank of America Corp. said it will repurchase an extra $5 billion of its shares, helping offset the additional stock issued after Warren Buffett's Berkshire Hathaway Inc. exercised outstanding warrants.

The purchases will be on top of the $12.9 billion common stock buyback plan announced June 28, the Charlotte, North Carolina-based bank said Tuesday in a statement. The additional distribution also mitigates the increase in regulatory capital from the sale of the non-U.S. consumer credit-card business earlier this year, the bank said.

Buffett converted warrants acquired after the financial crisis into 700 million shares of Bank of America stock in August, locking in an $11.5 billion investment gain. Berkshire Hathaway had said in June it would convert its preferred shares into common stock once the lender increased its dividend.

“We view today's announcement favorably as it provides further evidence that BAC is dedicated to returning excess capital to shareholders,” RBC Capital Markets analyst Gerard Cassidy said in a note to investors.

Bank of America shares climbed 1 percent to $29.35 at 8:59 a.m. in early trading in New York. The stock rose 31 percent through Monday, the second-best performance in the 24-company KBW Bank Index.

On Monday, Mastercard Inc., the world's second-largest payments network, said it would repurchase an additional $4 billion worth of stock and boost its dividend 14 percent to 25 cents per share.

--With assistance from Laura J. Keller

To contact the reporter on this story: Jenny Surane in New York at jsurane4@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steven Crabill, Larry DiTore

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